THE UK Government suffered a defeat over its welfare reform proposals last night when members of the House of Lords supported a move to exempt child benefit from the £26,000 benefits cap.

Peers voted by 252 to 237, majority 15, in favour of an amendment which received Labour backing.

The Bishop of Ripon and Leeds, the Rt Rev John Packer, who introduced the amendment, said: “It cannot be right for the cap to be the same for a childless couple as for a couple with children. Child benefit is the most appropriate way to right this unfairness.”

Former Liberal Democrat leader Lord Ashdown warned yesterday that the plans to cap benefits were “completely unacceptable” in their current form. The Department for Work & Pensions’ own impact assessment stated that “fewer than 3% of affected households are in Wales” while 54% are in Greater London.

The department calculated 3,000 adults and 7,000 children in Wales lived in households that would be affected – a quarter of which are in Cardiff.

Victoria Winckler, director of the Bevan Foundation said: “The plans to introduce a cap on benefits actually only relate to 1% of all benefit claimants next year, but will disproportionately harm children – for example those with disabilities.

Ms Winckler added: “This debate is also providing a convenient diversion from the appalling fact that the number of Job Seekers Allowance claimants in Britain has increased by 77% since 2008. This isn’t because people have spotted a benefits cash-cow but rather is a direct symptom of the rising number of job losses due to the very difficult economic circumstances people across Wales and the UK face.”

Stephen Doughty, head of Oxfam Cymru said: “Another crucial issue at stake as this legislation is discussed today is how future benefits will be paid to couples...Our research shows that the current plan could see women lose control of benefits that are meant to help children in their family.”

Labour Shadow Wales Minister, Nia Griffith, warned Welsh councils would be in an “impossible situation” as they sought to deal with families evicted by private landlords.

She said: “Government Ministers are living in cloud cuckoo land if they think that by cutting back on the money families receive to cover their current rent, private landlords will miraculously lower their rents. That is simply not going to happen, certainly not in the short term.

“The reality will be that we will see low income families either having to use money they now spend on essentials like food and heating to pay their rent or getting into serious debt. If private tenants then get evicted from their homes, it will be local councils across Wales who are left to pick up the tab for botched Tory cuts, putting them in an impossible situation.”

Plaid Cymru peer Lord Wigley said: “The Government’s policy is, by use of the cap, to force up to 67,000 families and 200,000 children on benefits to move from southeast England to places in Wales and northeast England where rents are lower. This is nothing short of a clearance scheme to transplant vulnerable people, including school children and disabled people, to areas like Middlesbrough or Merthyr Tydfil, where rents may be low, but where they have no chance of finding work.”

He added: “It is also outrageous that workers who have suffered injuries or disease as a result of their work – such as slate quarrymen – and have been awarded benefit as compensation, should lose that benefit if other factors – such as rent levels – are outside their control.”

Lib Dem rebels included Lord Roberts of Llandudno. The Government was supported by 39 Lib Dem peers including Lord Carlile of Berriew.

Lord Freud defended the cap, insisting households should not be able to receive more in benefits than the average family earned from work. He promised an “organised’” one-year transition period, telling peers: “Someone in work should always be better off than someone on benefits. The proposed cap of £500 a week is equivalent to an annual salary of £35,000 a year before tax.”